Home ›› 03 Jun 2022 ›› Front
Faced with the strong outcry of the bankers, the Bangladesh Bank has allowed a floating exchange rate system backtracking on its earlier directive on the uniform exchange rate.
The move comes three days after setting a uniform dollar-taka exchange rate for international trade and homebound remittance to curb currency volatility.
“We lifted the uniform exchange rate as the earlier directive was proved ineffective,” said BB spokesperson Md Serajul Islam
“The floating exchange rate is an international practice and we need to follow it,” he said.
On Thursday, the central bank verbally instructed the banks to determine the taka-dollar exchange rates on demand and supply in the market, said the BB spokesperson.
However, the BB will remain vigilant in the foreign exchange market.
The central bank moved away from its earlier directive issued on May 29 after an emergency meeting with the Association of Bankers, Bangladesh (ABB) on Wednesday night, according to BB officials.
Some private commercial banks faced dollar shortages to settle import payments due to the uniform exchange rate, they said.
The BB officials also cited the falling trend of remittance behind the lifting of uniform exchange rates.
The remittances sent by expatriate workers in the 11 months of the current fiscal year stood at $19.19 billion, down a 15.94 percent in the same period a year earlier.
The remittance inflow has fallen because the US dollar rate in kerb market is higher than the rates offered by banks.
When The Business Post contacted officials of the treasury department at three private commercial banks, they said their banks faced US dollar shortages in the last two days because exporters did not encash their export bills due to the uniform exchange rate.
On May 29, the BB fixed the inter-bank exchange rate at Tk89 per US dollar in contrast to the existing Tk87.90 and the LC for import or Bills for Collection (BC rate) was fixed at Tk89.15 per US dollar in contrast to the existing Tk 88.
However, maximum banks did not follow the uniform exchange rate in the last two days.
BRAC Bank Deputy Managing Director and Head of Treasury and Financial Institutions Shaheen Iqbal welcomed the central bank’s latest decision saying it will help cool down the forex market.
He said the forex market was almost stagnant in the last two days due to the uniform exchange rate.
“There are huge demands for US dollar now as most of the banks are now buying US dollar than selling in the inter-bank foreign exchange market,” said Iqbal.
Soon after lifting the uniform exchange rate, the BB injected $135 million into the market.
From August through June 2, the central bank pumped over $6 billion into the market to stabilise the currency market.
On Thursday, the taka lost its value by 90 poisa to Tk 89.9 against the US dollar further thanks to the higher demand for the greenback.
On the other hand, the exchange rate for settling import payments stood at 91.95 per US dollar, according to the BB officials.
However, importers said that they were still paying Tk 94 to Tk 96 to buy a US dollar for settling down import payments.
World Bank, Dhaka office former lead economist Zahid Hussain welcomed the central bank’s latest move.
“The BB’s previous decision was not right in the open market economy. If it stuck to its previous decision, the remittance flow would decline drastically,” he said.
He, however, said despite the central bank’s latest decision, it will take some time to cool down the forex market because the BB is yet to issue any circular in this regard.
